Self-Instruct
A provision is an amount of money that is set aside from a company's profits to cover a potential loss or liability. This is done in order to ensure that the company has enough money to cover any potential losses or liabilities in the future. A reserve is an amount of money that is set aside from a company's profits to cover a future or uncertain expense. This is done in order to ensure that the company has enough money to cover any future or uncertain expenses.
The main difference between a provision and a reserve is that a provision is set aside to cover potential losses or liabilities, while a reserve is set aside to cover future or uncertain expenses. A provision is usually made when a company is expecting a certain amount of money to be lost in the future, while a reserve is usually made when a company is expecting a certain amount of money to be spent in the future.
In terms of accounting, a provision is recorded as a liability on the balance sheet, while a reserve is recorded as an asset. This means that a provision is a negative figure on the balance sheet, while a reserve is a positive figure.
In terms of taxation, a provision is deducted from a company's profits for tax purposes, while a reserve is not. This means that a provision reduces the company's taxable profits, while a reserve does not.
In conclusion, the main difference between a provision and a reserve is that a provision is set aside to cover potential losses or liabilities, while a reserve is set aside to cover future or uncertain expenses. A provision is recorded as a liability on the balance sheet, while a reserve is recorded as an asset. A provision is deducted from a company's profits for tax purposes, while a reserve is not.